The U.S. Department of Agriculture’s Economic Research Service (ERS) indicated on Wednesday that, “Net farm income, a broad measure of profits, is forecast to decrease $4.3 billion (6.7 percent) to $59.5 billion in 2018, which would be the lowest level in nominal terms since 2006.”
The ERS update noted that, “Crop cash receipts are forecast to be $188.2 billion in 2018, a decrease of $1.5 billion (0.8 percent) from 2017.
Corn receipts are expected to decline $1.9 billion (4.0 percent) in 2018, reflecting forecast declines primarily in prices but also quantities sold.
“Wheat receipts are expected to decline $0.3 billion (3.5 percent) from 2017 as a predicted decline in quantity sold more than offsets an expected increase in the price of wheat. Higher soybean receipts ($1.7 billion or 4.5 percent) are predicted in 2018 as higher expected quantities sold more than offset an anticipated decline in price.”
Turning to livestock, ERS explained that, “Total animal/animal product cash receipts are expected to fall $0.5 billion (0.3 percent) to $174.9 billion in 2018. Declining receipts for milk, turkeys, and broilers are projected to more than offset higher receipts from other animals and animal products.”
On the issue of federal government farm program payments, Wednesday’s update noted that, “Direct government farm program payments are forecast to decline 18.6 percent ($2.1 billion) from 2017 to 2018 in nominal terms.”
More narrowly on the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs, ERS stated that, “The $737-million (23 percent) decrease in PLC payments in 2018 mostly reflects expected increases in 2017 market-year prices for commodities—including wheat and long-grain rice—where payments are expected, reducing their 2018 calendar-year PLC payments.”
“ARC payments in 2018 are expected to decline over $1.1 billion (31 percent) from 2017. The decrease in ARC payments from calendar year 2017 (2016 crop year ARC payments) to calendar-year 2018 (2017 crop-year ARC payments) is largely because the 2017 county revenue guarantees are generally lower than for 2016.”
With respect to production expenses, ERS stated that, “Production expenses are forecast at $359.2 billion (nominal) in 2018, up 1.0 percent ($3.5 billion). When adjusted for inflation, total production expenses are forecast to fall 0.8 percent.”
More specifically on expenses, Wednesday’s update explained that, “While the 2018 farm sector expense forecast is little changed from the 2017 forecast, this masks fluctuations in individual expense items.”
ERS also pointed out on Wednesday that,
Farm households typically receive income from both farm and off-farm sources
“In recent years, slightly more than half of farm households have had negative farm income each year. Most of these households earn positive off-farm income—and median off-farm income is forecast to increase 2.3 percent from $66,468 in 2016 to $68,011 in 2017, and another 2.8 percent in 2018 to $69,940.”
When looking at solvency and liquidity issues, ERS indicated that, “Working capital, which is the amount of cash and cash-convertible assets minus amounts due to creditors within 12 months, is forecast at $56.2 billion in 2018, a 16-percent decline from the 2017 projected amount. This decline reflects expected declines in 2018 farm income and current assets and an increase in current debt.”